Why Did I Get This Chargeback?


Cyndi Hoddinott

Growth & Partnerships

April 13, 2022

April 13, 2022

April 13, 2022

In this post, we’re going to start digging a little deeper into the details first mentioned in my last blog post, The Chargeback Lifecycle. Specifically, let’s explore the many reasons for receiving a chargeback.

We’ll start with a refresher of the key terms and players from the first chargeback lifecycle post:


For full definitions of any of the chargeback reason codes used in this post, see our Industry Terms guide.


Why are chargebacks reasons/reason codes important?

Chargeback reasons and the codes card brands assign to them give an indication as to the issue that ultimately led to a dispute. As a merchant, this can provide valuable insight into your business and indicate changes you can make to either detect service issues or fraud earlier in the customer journey, or flag technical issues that need remediation.

There are four general categories of chargebacks (with several ‘reasons’ within each bucket):

  • Authorizations - These are often related to card present transactions. They include processing a transaction without obtaining an authorization or on a declined authorization; they can also occur if you fail to include an authorization in the settlement file (for both card present and card-not-present transactions).

  • Processing errors - Here is where you’ll find mostly bank chargebacks. Some of those result from late presentment, processing the incorrect currency, and duplicate processing.

  • Fraud - With these, you must determine if the transaction is true fraud or friendly fraud, which impacts how you manage the cardholder/customer account going forward. We will further break down fraud in a subsequent blog post.

  • Consumer-initiated disputes - These are largely related to service issues, such as the customer not receiving the merchandise or services, canceled recurring payments, merchants failing to properly process a customer’s return, or items not appearing as described or defective. 

Bank Chargeback Reasons

When thinking about chargebacks, most think only of cardholder-initiated disputes. However, chargebacks can be started by the issuer as well—these are known as bank chargebacks. 

When an issuer initiates the chargeback process for a bank chargeback, they generally do so without advising the cardholder. Some of these disputes will be resolved between the acquirer and issuer, while others will require the merchant’s involvement. Reasons for bank chargebacks are usually in the authorization or processing errors categories, such as:

  • Incorrect transaction code

  • Late presentment

  • Incorrect currency 

  • Incorrect amount

  • Duplicate processing

Issuers can also initiate bank chargebacks when they suspect merchant fraud. Merchant fraud occurs when someone within a merchant business is committing fraud, or a third party acts as a merchant to process fraudulent transactions.

Customer-Initiated Dispute Reasons

There are a wide range of dispute reasons in the fraud and consumer/cardholder disputes categories. These disputes are where you find your customers voicing their biggest concerns or frustrations with your business. Examples include:

  • Merchandise/services not received

  • Canceled recurring

  • Canceled merchandise/services

  • Not as described/defective

  • Credit not processed

  • Fraud - card present environment

  • Fraud - card absent environment

According to Chargeback Gurus,  the top 3 customer-initiated dispute reasons in 2020 were fraud, canceled recurring, and canceled merchandise/services. 

Understanding your chargeback reasons

This is a lot of information to digest, but the first step to understanding your chargebacks is to always look at  your payment processing data—specifically aggregated and normalized chargeback data from all of your solution providers. Through Peacock, Pagos provides a solution for accessing that data, along with actionable insights and business intelligence across your entire payments ecosystem. You can even drill down into important categorizations of your disputes, such as chargebacks by processor, card type, or BIN. We will look further into these insights and see some examples as we continue our blog series on chargebacks.

One thing to be aware of is that the chargeback reason assigned by the issuer is not always accurate. It’s possible the cardholder mistakenly provided the wrong information to their bank—or did so on purpose—or the issuer made the mistake in categorizing the dispute. Regardless, it’s always best practice to do at least some initial research on all the chargebacks you receive to ensure you handle them correctly. 

For example, let’s say your customer disputes a transaction with the chargeback reason listed as duplicate processing. You conduct your research and find that there is not a duplicate charge, but rather the customer called to cancel their subscription (canceled recurring) and your customer support team didn’t take the necessary action. Now that you know the correct reason, your response will be different! Instead of simply allowing the chargeback for a duplicate charge, you can cancel the customer’s subscription in order to avoid future chargebacks, and put that customer into a customer recovery process, if you have one.   

Looking at your chargebacks by reason code is the most relevant data point in any chargeback analysis. In addition to the insight it provides you for your internal investigation and remediation, it also defines exactly what evidence card brands require you to provide to dispute it successfully throughout the chargeback lifecycle. And keep in mind: a successfully defended chargeback can result in you receiving the lost funds back.

Peacock by Pagos can help you and your team to have a greater understanding of your chargebacks by reason. By categorizing, tracking, and analyzing your chargebacks, you have a much greater chance of increasing your customer retention rate over the long term. 

What types of chargebacks would you like to know more about? Contact us here and we will incorporate that into a future post!

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